WPI dropout finds success in Hong Kong

Yat Siu is an only child, born in Vienna. And his journey from there to Hong Kong helps explain the success of his company, Outblaze.

Mr. Siu's parents were both musicians living in Austria when he was born — making them among the very few ethnic Chinese in the country at the time, he explained in a February 2012 interview.

Mr. Siu's parents urged him to become a musician. But despite earning a degree in music from Musik Konservatorium in Vienna, Mr. Siu was more interested in computers. He taught himself to program on a Texas Instruments 99/4 A, a Commodore 64, and an Atari VCS, among others.

In high school, Mr. Siu wrote software for Atari ST computers. This attracted the attention of Atari, which hired Mr. Siu after he graduated from high school and brought him to the U.S. to work on multimedia software. At the same time, Mr. Siu attended Worcester Polytechnic Institute to study computer science, but after a visit to Boston he found that city more fun and more stimulating. He soon transferred to Boston University.

When Atari retreated from the computer business in 1993, Mr. Siu saw an opportunity to continue serving the old Atari user base. With some of his Atari colleagues, Mr. Siu started ventures that offered multimedia software, customer support and hardware upgrades.

For example, he set up a profitable business to import PCs that could display a wide range of colors by re-engineering old Atari computers to use new PC color cards that boosted color count well beyond the standard maximum of 512 or 4,096.

In the early 1990s, Mr. Siu served as a consultant for SGI. In that role, he was shuttled around to Japan, Taiwan and Hong Kong. This gave him his first understanding of the region and how it did business.

Mr. Siu moved to Hong Kong in the mid-1990s to launch Hong Kong Online, the city's first business Internet service provider. But he ran into a brick wall. Despite his Chinese parents and Hong Kong heritage, he experienced “culture shock.”

As he described it, “The environment was predominantly nepotistic and hostile to a young entrepreneur in his early 20s — especially one who wore jeans and talked about intangible concepts like email and the Internet.”

Most businesses he tried to sell had no interest in the Internet or its potential, and Mr. Siu decided he had to educate the market. One customer win was a textile company for whom Hong Kong Online saved a bundle — instead of FedExing daily samples to customers in the West, Hong Kong Online let the company email fabric images.

Mr. Siu decided that Hong Kong Online was too much of a slog, so he started a free webpage provider — Hong Kong Cybercity. HKC offered email services and Web hosting with Common Gateway Interface that let users run programs on their websites. After attracting a respectable 300,000 users, Mr. Siu renamed it Freenation and sold to a U.S.-based company.

That morphed into Outblaze, a holding company for various digital media subsidiaries and joint ventures.

But Outblaze began life in 1998 as a so-called white label services provider. In exchange for a service fee or revenue sharing agreement, Outblaze clients would receive Web-hosted services like webmail, message boards, chat, file sharing and mailing lists.

Mr. Siu was ahead of his time, offering what's now known as cloud computing at a price point “20 times lower than the competition,” according to Mr. Siu. This venture was losing money, and thanks to the Asian economic crisis at the time, the economy was weak, so cash flow was a problem.

In his scramble for outside cash, Mr. Siu tried Hong Kong investors, but they did not have a culture of technology venture capitalism. Silicon Valley was not interested.

Out of options, Mr. Siu turned to a local construction company. The deal was a first for the city: a bricks-and-mortar company (not a bank or a VC fund) investing in a tech startup. The media covered the news extensively, which sparked interest in Internet investment in Hong Kong.

With the dot-com bust, Outblaze shifted focus to provide business-focused services such as domain name registrar services. Unfortunately for Mr. Siu, Outblaze's email business ran into a big competitive challenge — Google Gmail, which offered customers a gigabyte's worth of free email.

And that was an offer that Outblaze could not afford to match. But thanks to its low cost structure, Outblaze was able to expand its white-label service. In April 2012, International Business Machines bought Outlblaze's low-cost email assets for an undisclosed price.

In early 2011, Outblaze co-founded Animoca to create popular apps like Pretty Pet Salon, which attracted the attention of Silicon Valley venture capitalists. Among others, Intel Capital invested in Animoca.

Mr. Siu's startup success shows that a true entrepreneur can't be stopped by aggressive competitors, skeptical customers, an unsupportive culture or difficulty raising capital. Those are just speed bumps on the road to victory.

Peter Cohan of Marlboro heads a management consulting and venture capital firm, teaches business strategy, and is the author of 11 books – most recently, “Hungry Start-up Strategy: Creating New Ventures with Limited Resources and Unlimited Vision.” His column runs Sundays and Wednesdays on telegram.com. His email address is peter@petercohan.com.

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